A leaking student pool

Skills Australia chair Phil Bullock wasn’t happy, in a friendly sort of way, when I suggested that his organisation was a central planning agency (this was at a seminar to discuss the papers that ended up in this publication).

In their recent paper on ‘market design’, they deny that they favour central planning:

It is important to emphasise that Skills Australia does not advocate a ‘central planning agency’ approach based on detailed forecasting of skills.

It’s true that they don’t advocate the kind of micro-level central student place allocations we’ve sometimes seen in higher education. But Skills Australia does want what they call a ‘managed market’, in which governments purchase student places to align them with ‘community and industry needs’.

But I’m not sure that they have really thought enough about how this works in practice. With the central planner’s mindset, they want to shape student behaviour largely by restricting options:

Governments would continue to exercise control over individual choice by limiting
funding for certain programs, putting in place restrictions such as caps or eligibility criteria or allocating funding for specific training places or institutions to encourage take up.

The problem here is that the central planners don’t have the coercive or monopoly powers needed to make this work.

Nobody can make a student do a course. This isn’t like school where compulsory education, or the need to complete year 12 to open other opportunities, forces young people to choose from within the state curriculum.

And contrary to an implicit assumption behind this exercise of choice-limiting ‘control’, students have plenty of substitutes for the central planner’s desired options.

There are numerous other possible courses within the TAFE system. There is a large private vocational education sector. Some vocational education students have the marks to do university courses instead. Or there is employment. The pool of potential students has multiple leaks.

The vocational education demand data is very limited, but Victorian statistics on TAFE diploma courses shows that 40% of applicants reject their offers. So even among people with enough interest in a course to put it on their preference list in the end decide on something else.

And of course it is one thing to get a student to enrol in a course, and quite another to get them to finish it. Many TAFE courses have very low completion rates. There is a legitimate debate about how badly this reflects on TAFEs, since students leave when they have the skills they want or when they get a job, but it highlights how hard it is to use choice constraint as a skills steering tool. People who enrol because they had no better choices at the time will leave if a better choice emerges during the course.

Given the situation of Australia’s vocational education central planners, in which they have only partial control on the supply side and almost no control on the demand side, they need to look at approaches based on persuading students, not on commanding suppliers.

10 thoughts on “A leaking student pool

  1. “Many TAFE courses have very low completion rates. There is a legitimate debate about how badly this reflects on TAFEs, since students leave when they have the skills they want or when they get a job”
    Investigating the second one of those would be really worthwhile, since blaming TAFEs for the low completion rates is not necessarily fair. It’s no doubt that some of the drop outs happen because of low apprenticeship wages, and no doubt others happen not because the people there wouldn’t want the qualification, but rather because they have very short term goals in mind and are simply too lazy to finish them because they want to do other less productive things (e.g., partying with friends — the problem of getting groups of young males of average intelligence together). This is pretty clear if you consider the benefit of having many of the qualifications (good pay and full-employment for the rest of your life), versus the drop-out rate (up to 50%). I find it hard to believe that those sorts of figures are due to the teaching or the outcomes in many cases.


  2. Based on the above, to say that Skills Australia does not engage in central planning is like saying the government does not engage in ‘picking winners’ when they hand over cash to local hybrid car projects – in both cases they are holding themselves out as knowing what’s better for Australia than the sum of private individuals and businesses. Advocates of intervention know there is a sensitivity around certain terms, so they find euphemisms.
    And based on the TAFE evidence, picking winners in education seems just as futile as picking winners elsewhere.


  3. Conrad – I don’t know the literature on TAFE completions very well at all, but have read enough to know it is even more complex than in higher education. No doubt the nature of the client base compared to higher ed makes it more difficult to find people who will persist.

    Rajat – I get the impression that many employers also want planning – or probably to be more precise they want the government to guarantee that they will get subsidised staff training via TAFE. Unfortunately, the skills debate has been rather captured by employers who want the state to fix their recruitment and training problems.


  4. If industry wants to fix its own skills shortage then they need to do what the army does. Hire someone, train them in a trade, make it worth their while to stay.

    Paying apprentices badly and treating them like crap is a really great way to make sure they stick around and contribute to your business.


  5. While the situation is a little different for TAFE because the commitment is a lot shorter, I wouldn’t exactly describe the 17-year-olds filling out university entry forms as fully-informed customers.


  6. Having worked in TAFE (no not as a teacher) an seen the quality of some of the courses it’s no wonder they have high dropout rates.

    To be fair though – none of the people who have done apprenticeships that I know have ever stayed with the one employer, or the one tafe or the one trade. Yet most of them have actually finished after 5 or 6 years or so.

    So there will be an enormous amount of churn in that area with people being counted as dropouts and new entrants many times over.

    While we are on apprenticeships and trades – why the hell haven’t we had any real change in how its all done for 30 or 40 years. Its crazy.

    To be a carpenter you have to exist on not much more than the dole for years, own and run a car to travel huge distances to jobs, buy tools, workclothes and do shitty labouring work for 3 or 4 years to get through.


  7. Robert – On the issue in question – course field of study – most of them do have a reasonably good idea of what they want to do.

    Also, if you take a look at my paper in the second link I show using university applications data that market demand already does what Skills Australia claims it is needed to do, which is move with labour market shortages.

    I was also able to show that TAFE enrolments already shift with labour market trends, though because there is little centralised vocational education applications data I could not tell to what extent this was due to 1st preference demand shifts.


  8. If it waddles like a duck and quacks like a duck . . . it’s central planning, even if they don’t like to admit it!

    Andrew – I haven’t read the paper, but how does Skills Australia square it’s committment to purchasing student places to align them with ‘community and industry needs’ with the Victorian government’s move to demand driven funding for vocational training? Do they say anything about the Cwth’s decision to go with student centered funding for higher ed from 2012? Is it only me, or is there a condradiction between managed markets and student’s choice?


  9. johno – The rationalisation is below. The distinction with higher ed, based on higher student co-payments, seems dubious to me. While there is an in-principle argument that payment should come with choice entitlements, Skill Australia’sm theoretical argument is concerned with labour force planning, and in that regard their arguments are (in theory) stronger in higher than voc ed. The supposed information asymmetries are much lower in voc ed, as in voc ed often the employer will be the purchaser and knows more rather than less than the TAFE about what is required, or the student is already employed and knows what he or she needs. The cost of error is much lower, so trial and error is less concerning in voc ed. Skills Australia also say that the case for planning is strongest for courses with long lead times, but lead times are much longer in higher ed.

    “We recognise entitlement models being pursued in Victoria and through the Youth Compact operate within policy objectives linked to economic and social objectives and
    can be accommodated within a managed market purchasing model which is informed byindustry advice on the priority of skills needed. Skills Australia acknowledges individual entitlement, or access to places, such as the Youth
    Compact, has a place in the VET sector—particularly in a period of economic downturn. However a fully student demand led model may be more appropriate where restricted to the higher education sector where individuals are major co-investors with government in funding their education.”


  10. On managed market and student choice, we need to distinguish between two functions of markets.

    The first is the overall allocation of resources between fields of study. They reject the market on that, and this is the ‘managed’ part.

    The second is using markets to promote efficiency/effectiveness etc in the delivery of courses in pre-determined fields of study. They accept that markets can increase the responsiveness of providers. This is the ‘market’ element.


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